Penny breakage quietly arrives in Kentucky at Ellis Park

Henderson, Ky.

There was no ceremony Friday afternoon when the prices were posted after the first race at Ellis Park. But there was no mistaking it was the start of a new era in wagering.

At 12:58 p.m. CDT on a sultry, summer day, the toteboard flashed the official results. Zelig, the 3-5 post-time favorite in the $12,500 claiming race, did not pay $3.20 to win. He paid $3.38.

Thus was born penny breakage, a victory for horseplayers who have pined for the day when tracks did not round their winnings down to the nearest dime on the dollar but, instead, to the cent.

Click here for Ellis Park entries and results.

“I don’t see any irate customers,” Ellis Park corporate general manager Jeff Inman said as he walked through a modest-sized crowd beneath the old grandstand. “I don’t see any lines. I am feeling pretty good right now.”

Because of how the calendar dates fell, Ellis Park was the first racecourse to be affected by a new Kentucky law requiring the state’s tracks to quit rounding down payouts while pocketing the difference.

“It’s good for the bettors, and it’s good for Kentucky horse racing,” said Adam Koenig, a Republican who has served 16 years in the state’s House of Representatives.

As the chairman of the committee handling licensing, occupations and administrative regulations, he sponsored this year’s pari-mutuel reform bill that made sweeping changes in the state’s racing structure. It included a leveling of the tax rates that impact the sport, the elimination of a 15-cent surcharge on the admission of every racetrack patron and the advent of penny breakage.

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“It was a confluence of circumstances,” Koenig said. “We had just taken care of everybody else in the game except for the bettors. As a stand-alone, (penny breakage) probably wouldn’t have passed, but with all the different changes, it was an opportunity.”

Instead of ending with zeroes, payouts on $2 bets at Kentucky tracks will end with an even number that is double what the odds to $1 will show. The Equibase chart for the first race said Zelig paid 69 cents to the dollar, not 60 cents. Double that for a $2 wager, and the result was the $3.38 payout. The 18-cent difference between what used to be paid and the result under penny breakage was the biggest it could have been.

“That’s a big difference right there,” said Eddie Nelson, a Memphis businessman who is a regular player at Ellis Park and Churchill Downs. “If you made a significant bet on that horse instead of using it as a single on a Pick 5, you might want to throw an extra $200 on this one to win to get that extra $18.”

Inman said he hopes other bettors will feel the same way – and show their satisfaction at the betting windows if not through advanced-deposit wagering.

“I guess you could say we see a loss of revenue,” Inman said. “I never really saw it that way. I’ve worked in racing and in gaming. In gaming you pay the customer to the penny. I was always adamant that when Rep. Koenig put this forward, we were going to give true payments to the customers, because that’s the way it should be.”

Inman said the $20,000-$30,000 that Ellis Park stood to lose by not rounding payouts to the dime would be offset by the elimination of the admission tax on customers.

“It’s a wash,” he said.

The biggest question Inman had was whether the toteboard and betting monitors actually would reflect the change in real time Friday. Standing in the track’s upstairs dining room, he quietly waited for the toteboard to post the prices without any glitches. He smiled when it all went according to plan.

“The back end was a lot easier than we thought,” he said. “There were some basic settings that we had to adjust, and we had to test with the (Kentucky Horse Racing Commission) and make sure those results actually showed up on the toteboard. The most challenging part, frankly, was educating my staff on the change and making sure they know how to handle it.”

Inman said he even went so far as to order $700 in pennies so mutuel clerks could make change as needed for $2 bettors.

The big announcement of the advent of penny breakage actually came Wednesday from the Thoroughbred Idea Foundation, whose leader Pat Cummings was the guiding prod behind the creation of the bill. Otherwise, Ellis Park was rather low key about the change. Lacking any formal video or audio announcement, most people who came to the track Friday probably did not even notice the difference.

“We have a very ‘state-fair’ casual customer base for our live meet,” Inman said. “We have avid horseplayers; don’t get me wrong. I’m thinking we’ll really see it in our out-of-state and ADW handle. I’m really interested to see that show action.”

Savvy horseplayers have suggested the show pool would be where most of the gains would be made in penny breakage, because the difference in the percentage on payouts will be greater. The comparison may be hard to gauge right away, because most of the records for win, place and show handle do not parse it by category.

“The show pools seem like they’re going to be getting the bigger benefit out of it,” Nelson said. “I don’t ever play them unless there’s a big bridge jumper (short-priced favorite) or something. Then I try to beat them.”

Nevertheless, Nelson was enthusiastic about the added money coming back to horseplayers.

“They’ve been taking money off of us forever with that breakage, and nobody really complains about it,” he said. “You generally hear people talking about the multi-race bets – Pick 4s, Pick 5s and stuff – but when you see this right here, it makes you think about where you’re putting your money. There’s a lot more value in that 3-5 horse that won the first race than there was a week ago.”

Himself an enthusiastic horseplayer, Koenig said the only pushback he got when he and Republican state Sen. Damon Thayer shepherded the bill to Democratic Gov. Andy Beshear’s eventual signature came from Churchill Downs.

“They’re the only (track) with an ADW,” Koenig said. “It wasn’t targeted at them, but when you’re the behemoth, that’s the way it goes. Not to get all Republican, but whenever taxes are raised across the board on everybody, it’s still the billionaires who pay the most. That’s what comes with being the behemoth.”

The ripple effect from Friday at Ellis Park is bound to be felt nationwide even before penny breakage may be copied in other states. ADW players would have noticed Friday. The big audience that watches and bets on the Kentucky Derby will be beneficiaries next spring. Koenig was quick to point out that at Keeneland this fall, two big days will be conspicuous by their payouts ending in numbers other than zero.

“Imagine the Breeders’ Cup,” he said.

How quickly other states follow Kentucky’s lead remains to be seen. Both Koenig and Inman said they have not been in contact with other tracks in other jurisdictions just yet. Right now, the formal conversations have been limited to Ellis Park and the next track up come September.

“The emails have really gone with Kentucky Downs and us, because we’re the first,” Inman said.

Koenig predicted it would not be long before penny breakage will be trending across the country.

“How many places are in a race to have the lowest Pick 5 takeout?” he said. “Breakage is takeout, so why wouldn’t other states love to compete?”